Demand For Executives is Up, But Scandals Change Hiring
By Chat Dembeck, Daily Record Business Writer

June 18, 2004 – Although the strengthening economy has many companies looking to hire new executives, the fallout from recent corporate scandals has permanently changed the hiring process, according to several recruitment experts.

Responding to the misdeeds of various high-profile executives, from Tyco's Dennis Kozlowski to WorldCom's Bernie Ebbers, companies are scrutinizing candidates much more thoroughly than ever before, said Charles Durakis Jr., president of Durakis Executive Search in Cockeysville.

"From an ethics standpoint, [companies] must take a harder look and carefully probe for any fabrications in a candidate's resume," said Durakis, who has been a recruiter for more than 20 years.

Today, applicants' resumes are being checked and double checked, said Lori Raggio, president of the Baltimore chapter of the Society for Human Resource Management, an industry trade group. "The recruiter and HR work together on this as team."

The character of an executive candidate has also become an issue, Durakis said. "It's not uncommon for some firms to hire a private investigator to do a thorough background check on an executive before making an offer."

This keeps some executives from looking for a new job, Durakis added.

Executive candidates interviewing with companies can now expect to be quizzed about corporate ethics, said John Challenger, chief executive of Challenger, Gray & Christmas Inc., a global outplacement firm.

"Recent corporate scandals shocked many members of corporate boards," Challenger said. "They want to get back to the right kind of ethics."

There are other interesting trends developing in the executive recruiting industry.

For example, the escalating cost of employee benefits is driving salaries being offered executives who specialize in benefits, Durakis said. "A company is willing to pay an executive $150,000 a year if their expertise can save the company millions," he added.

Moreover, the once-popular trend of offering stock options to sweeten a recruitment package has all but disappeared, said Durakis.

"Companies are being careful because stock options are expensive," he explained. "Now they say to an executive, 'do a great job first and we will consider offering the options later.'"

While the market for middle-management recruiting also is picking up, the last four years have been challenging, said Linda Burton, chief executive of the Timonium branch of MRI World Wide, an international staffing firm.

"There has been an upturn in the demand for engineering managers and sales and marketing managers," Burton said.

She attributes this to the fact that companies are finally experiencing more demand for their products and services.

"Even some of the companies in the high-tech sector are beginning to ramp up," she said.

The job market has been so lean for such a long time, Burton said that some candidates are becoming programmed to tell companies what they want to hear and to snatch the first offer they receive, with no questions asked.

"With the change in the market, I tell candidates they now have more options," she said.

Burton added that as the economy continues to improve, companies will have to stop deliberating so long when hiring middle managers.

"It's going to be a candidate-driven market again," she said.

The recruiters haven't been immune to change. The soft labor market has pushed down the cost recruiters can charge companies for placing an executive. While once recruiters charged roughly a third of the employee's annual salary, now many are charging less than 25 percent.

Chuck Durakis is president of Durakis Executive Search, a Timonium-based executive recruitment agency. For more than 20 years, Durakis has been delivering top-level talent to companies that range from early-stage startups to Fortune 1000 organizations.